Canada’s biggest banks are scheduled to report their fiscal second-quarter earnings this week, results that will test how lenders are coping with lower oil prices and sluggish economic growth.

Bank of Montreal will kick off earnings season on Wednesday. Royal Bank of Canada, Toronto-Dominion Bank, and Canadian Imperial Bank of Commerce report on Thursday and Bank of Nova Scotia will close out earnings season on Friday.

Most of Canada’s major banks are expected to show single-digit earnings growth this week while continuing to grapple with debt-laden consumers, an uncertain housing-market outlook and weak capital-markets activity.

Bank of Montreal, Canada’s fourth-largest by assets, could be the outlier.

Kicking off the fourth-quarter earnings season for the lenders on Tuesday, BMO is expected to post a 4% year-over-year drop in profit, according to analyst forecasts compiled by Thomson Reuters. By comparison, rivals Royal Bank of Canada, Toronto-Dominion Bank, and Bank of Nova Scotia – the country’s three largest banks by assets, respectively – are expected to show year-over-year profit gains for the quarter ended Oct. 31 of about 9%. Canadian Imperial Bank of Commerce, the smallest of the so-called “Big Five,” is forecast to generate a 5% gain.

BMO’s expected decline isn’t necessarily reflective of a big divergence in its performance compared with the rest of the group. Rather, its earnings for the year-ago period were particularly strong, up 30% from the prior year, Stonecap Securities notes.

All the banks face challenges growing revenue from their personal and commercial lending businesses in Canada. Demand for new residential mortgages and consumer loans are at risk because of rising house prices and record-high consumer debt. Read More »

Some of Canada’s biggest banks are targeting acquisitions in the U.S. to fuel growth, taking advantage of the economic rebound in that country while further offsetting their dependence on the domestic economy.

The so-called Big five – Royal Bank of Canada, Toronto-Dominion Bank, Bank of Montreal, Bank of Nova Scotia and Canadian Imperial Bank of Commerce – dominate Canada’s financial-services sector. That helped them report strong quarterly earnings last week and defy market expectations by generating gains from their Canadian retail lending businesses. Still, they acknowledge that future growth here will likely moderate as heavily indebted Canadians save more and the frothy housing market cools.

CIBC, the smallest of the major banks by assets, is targeting the wealth management arena in the U.S. as part of its diversification strategy. Read More »

Canada’s major banks posted strong third-quarter results, with each of the so-called Big Five topping analysts’ expectations despite worries that heavily mortgaged Canadians and rising house prices would hurt their domestic lending businesses.

The banks already dominate personal and commercial banking in Canada, limiting future growth opportunities on their home turf at the best of times. But the existing environment–including attempts by the Canadian government to cool the housing market and encourage consumers to reduce their debt loads–makes it even more challenging to increase revenues from domestic lending.

Royal Bank of Canada, the country’s largest bank by assets, Toronto-Dominion Bank, the second-largest, and fifth-ranked Canadian Imperial Bank of Commerce were the last three to report this week, releasing results Thursday. Read More »

Is price competition now verboten in Canada’s mortgage market? Or can mortgage providers compete on price, so long as they don’t advertise their ultra-low rates?

Reuters

Canadian Finance Minister Jim Flaherty had one of his staff call Manulife Financial Corp. Tuesday to tell the country’s largest life insurer he “was not happy” with its banking unit dropping its five-year fixed mortgage rate below 3%, kicking up quite a stir in the market.

Manulife Bank cut the rate to 2.89% from 3.01%–not much of a drop, but below the posted five-year rates at Canada’s major banks. Mr. Flaherty “felt the move was unacceptable” and is trying to prevent the type of “race to the bottom practices” that burst the U.S. housing bubble, his spokeswoman said in an email.

The minister has sounded a number of warnings about Canada’s housing market, and last summer tightened mortgage rules for the fourth time in as many years to put the brakes on overheating in some sectors of the market.

About Canada Real Time

Canada Real Time provides insight and analysis into what’s making news in Canada, a country punching above its weight on the world stage thanks to its vast resources and strong banking sector. Drawing on the expertise of The Wall Street Journal and Dow Jones Newswires, we take a look at developments in fields ranging from business to politics to culture. You can contact the editors at canadaeditors@dowjones.com